Will nat gas find bottom?

Silver technicals

Natural gas continues to decline after peaking just north of $4.800(NYMEX:NGQ14) on the August contract. The market has decline substantially over the past week or so and price now finds itself eyeing the psychologically important $4 level.

Certainly the intermediate-term and near-term momentum both portray a bearish picture; however, there are a few signals from the chart that could provide an early indication of a potential reversal. Looking at the RSI, one can’t help but notice the recent bullish divergence that has been occurring between RSI and price. Each successive low of the recent move has corresponded with relatively higher reading in the RSI. This lack of confirmation could be a preliminary indication that the current move is drawing to an end. Furthermore, this week’s bearish price action hasn’t been as drastic relative to previous weeks. The market has, for the most part, been trading sideways-to-negative, which could signify additional buying interest at these low levels.

Make no mistake about it, the underlying trend in this market remains negative until proven otherwise; however, there are a handful of signals that could serve as an early indication of a coming reversal. These signals should not be ignored as counter-trend traders could potentially catch a “knee-jerk” rally following this lengthy decline in price.

Aug. ‘14 Natural Gas 30-minute Bar Chart (e-Signal)

SILVER

Having found a bit of structure around the $20.76 to $20.805 area, the silver market(COMEX:SIQ14) has spent some time churning around this area as it decides on the next move. Despite recent weakness in this market, the intermediate-term trend remains positive above $20.63. This key support pivot could come into play today as a potential level from which to establish a long position for those bullish on silver.

Any sustained weakness below this level however, will likely shift the positive sentiment to a more neutral stance and could open the door so further declines. As a result, traders should keep an eye on the previously mentioned $20.63 level to help guide their trading decisions for today. Initial resistance in this market can be anticipated around 20.966 and 21.110 respectively. Above 20.110, silver will take on a much more optimistic outlook and if price can trade above previous highs at 21.630, this market may very well be on its way to a resumption of the recent positive trend.

Sep. ‘14 Silver 30-minute Bar Chart (e-Signal)

About the Author

Erik Tatje is currently a market strategist at RJO Futures and is the author ofThe Tatje Report, a daily technical correspondence. As a member of the Market Technicians Association, he has distinguished himself as a professional in the field of Technical Analysis and currently holds the Chartered Market Technician (CMT) designation. Erik can be reached atetatje@rjofutures.com or 312.373.5176. Learn more at www.rjofutures.com.